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GDP data in focus - AM Briefing
28 Apr 2017
ECB round-up and US GDP look-ahead - Video Update
27 Apr 2017
ECB meeting in focus - AM Briefing
27 Apr 2017
ECB's Rate Meeting, a look ahead - Video Update
26 Apr 2017
High hopes for Trump tax cuts - AM Briefing
26 Apr 2017
Global stock indices storm higher - PM Bulletin
25 Apr 2017
Indices mixed after firmer open - AM Briefing
25 Apr 2017
How to use Stop Losses in FX - Trading Guide
24 Apr 2017
French vote sees risk assets soar - AM Briefing
24 Apr 2017
Mixed European open despite Wall Street rally
21 Apr 2017
French Election in focus - Video Update
20 Apr 2017
French election and oil keep investors cautious - AM Briefing
20 Apr 2017
Equities off highs but still show resilience - Video Update
19 Apr 2017
Equities continue to drift lower - AM Bulletin
19 Apr 2017
Sterling soars on early UK election, but France the biggest concern
18 Apr 2017
Europe shrugs off US rally - AM Bulletin
18 Apr 2017
Trump's mouth sends dollar skidding lower - Video Update
13 Apr 2017
Dollar slumps on Trump comments - AM Bulletin
13 Apr 2017
Uncertain outlook ahead of holiday weekend - Video Update
12 Apr 2017
Equities recover after yesterday’s wobble - AM Briefing
12 Apr 2017
USDJPY approaching support - PM Bulletin
11 Apr 2017
Equities drifting in holiday-shortened week - AM Briefing
11 Apr 2017
Look-ahead to Janet Yellen’s speech this evening - PM Bulletin
10 Apr 2017
All eyes on G7 and Yellen - AM Bulletin
10 Apr 2017
US missile attack sends investors into “risk-off” mode - AM Briefing
07 Apr 2017
FOMC minutes rattle investors - Video Update
06 Apr 2017
Stunning reversal greets Fed minutes - AM Briefing
06 Apr 2017
ADP number points to big payroll beat on Friday - Video Update
05 Apr 2017
FOMC minutes in focus - AM Briefing
05 Apr 2017
US indices flag as first quarter ends - PM Bulletin
04 Apr 2017
Disappointing start to the new quarter - AM Briefing
04 Apr 2017
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Early moves

US stock indices surge on earnings/tax cut hopes

But European equities running out of steam

European indices were mixed to lower first thing this morning. Traders appear to be trimming their long-side exposure as there was a distinct lack of follow-though yesterday following Monday’s large gains. This was despite another strong close on Wall Street which saw the NASDAQ Composite top 6,000 for the first time ever. Investors were bulled up by some better-than-expected earnings and on hopes that President Trump will announce a cut to corporation tax later today.

Assuming the tax cut announcement meets expectations, investors will turn their attention to tomorrow’s ECB monetary policy meeting. Some analysts are speculating that the central bank could be ready to talk about tapering its programme of monthly bond purchases. This comes as many are convinced that Emmanuel Macron will win the French presidency. However, earlier this month ECB President Mario Draghi made it clear he saw no good reason for the bank to deviate from its current programme of monetary stimulus and negative interest rates which looks set to continue till the end of this year.

The yield on the key US 10-year Treasury is back above 2.30% this morning, and this is helping to boost sentiment. Just over a week ago it fell below 2.20% to trade down to 2.172%. If it can push higher from here US equities should continue to find support as it suggests the inflationary trade is back on. A move towards 2.20% suggests there are doubts over the outlook for US economic growth.

Stock Index Update

Fresh record close for NASDAQ

Rally driven by earnings and tax cut hopes

By yesterday’s close all the European majors had made it into positive territory. But overall the gains were modest, typified by the French CAC which closed up less than 0.2% higher following Monday’s gains of around 4%. So it was the US majors which took up the baton in the global stock market rally. Both the NASDAQ100 and the NASDAQ Composite ended the day at record highs while the Dow Jones Industrials and S&P500 both ended within 0.5% of their own highest closes. The gains were driven by some better-than-expected first quarter earnings reports and raised hopes that Trump is set to announce a significant cut to the corporate tax rate.

Meanwhile President Trump indicated that he may be prepared to wait until later this year to secure funding for a wall along the border with Mexico. This shift could clear the way for policymakers to put together a deal on the debt ceiling and so avoid a government shutdown on Saturday, which marks Trump's 100th day in office. In addition, the Trump administration is taking steps to impose a 20% tariff on Canadian softwood timber which is used in residential home construction. This would affect around $5 billion of Canadian exports to the US.

Commodities Update

API inventory build weighs on crude

Gold and silver slip again

After the close last night the American Petroleum Institute (API) released an update on US inventories for the week ending 21st April. This showed bigger-than-expected builds in crude and gasoline stocks and this is keeping a lid on prices in early trade.

Crude continues to struggle to make gains despite the widespread “risk on” rally that has taken place since Sunday’s French election result. Both WTI and Brent have been losing ground for the past fortnight with the biggest loss coming last Wednesday following the latest US inventory update from the Energy Information Administration (EIA). This recorded an unexpectedly-large rise in US gasoline inventories. We get the latest update from the EIA later today at 15:30 BST. Yesterday Saudi Arabia's deputy crown prince, Mohammed bin Salman, has said the state oil company Aramco is set to be valued at $2 trillion. However, most prior estimates (including from officials close to the deal) don’t believe the conglomerate is worth more than $1.5 trillion, according to the Wall Street Journal.

Gold and silver fell further yesterday, and once again this happened despite dollar weakness. Both metals are coming under pressure as investors unwind their safe-haven trades and head back to riskier, higher yielding assets such as equities. On Monday gold slumped below critical support around $1,280. It has attempted to recapture this level but has failed so far this week. The next significant support comes in around $1,250 which marks the 38.2% Fibonacci Retracement of gold’s sell-off between July and December 2016.

Forex Update

EURUSD steady above 1.0900

Jen slumps as risk appetite returns

The euro put in another strong showing yesterday with the EURUSD pushing and holding above 1.0900. The single currency consolidated following its big move on Monday which came after the first round result in the French presidential election. This saw the moderate, and bookies’ favourite, Emmanuel Macron go through to the final head-to-head on May 7th when he faces the Eurosceptic far right candidate Marine Le Pen. Investors now turn their attention to tomorrow’s ECB monetary policy meeting. Some analysts are speculating that the central bank could be ready to talk about tapering its programme of monthly bond purchases as they are convinced that Emmanuel Macron will win the French presidency and so end a period of uncertainty. However, earlier this month ECB President Mario Draghi made it clear he saw no good reason to deviate from the bank’s current programme of monetary stimulus and negative interest rates which looks set to continue till the end of this year.

The dollar slipped against all the majors although the Japanese yen was yesterday’s biggest casualty in FX. Investors sold (borrowed) the low-yielding currency and piled the proceeds into riskier, higher-yielding assets such as equities. The latter got a boost yesterday from a clutch of better-than-expected first quarter earnings updates. Chief amongst these were beats from Caterpillar, DuPont, 3M and McDonald’s and these have gone a long way from offsetting some disappointing numbers last week, most notably from Goldman Sachs.

Upcoming events

Today’s significant economic data releases and events include Canadian Retail Sales and US Crude Oil Inventories.


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Posted by David Morrison

Category: AM Bulletin

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